Half-Mustachian from Quebec/Canada looking to retire within 10 years

[pzkfwg]

So, I just discovered MMM’s blog and I find it so inspiring as a life goal to go FI early! I do find a lot in common (buy used car and use it the least possible, don’t contract debts…). I am already 36 y.o. so a nice goal would be to go FI in 10 years from now.

Life Situation: We are a family of 2 adults (37 & 36 y.o.) with two young children (4 & 8 years old) living in Montreal, Quebec, Canada.

Gross Salary/Wages: Our gross income is around $160,000. I provide for 53% of the income in the family and the following numbers are based on my part only (we can approximate for the entire family by multiplying everything per 2). BIG UPDATE: I UPDATED EVERYTHING FOR THE WHOLE FAMILY NOW! :-)

Adjusted Gross Income: Basically, on our gross salary of 86k+75k=161$, we have a “take-home” income (according to MMM definition) of 65k+50k=115k$. The low rate (relative to Quebec) is explained by maxing our RRSP contributions which are deducted from our gross salary in our tax report (see “Canadian investing with mr frugal toque” post for more info http://www.mrmoneymustache.com/2013/09/21/canadian-investing-with-mr-frugal-toque-part-1/).

Taxes: Apart from source deductions, we have city taxes that is worth another 4.8k$.

Current expenses:
-Savings (25%): 22k+9.7k=32k$  (Me:12k$ in RRSP, 5.3k$ in TFSA, 1.2k$ in saving account for future car, 4k$ remaining after 2016 | Spouse: 4k RRSP, 5k TFSA, unalocated 700$ saving)
-Home (23%) : 26k$  (12.8k$ mortgage, 4.8k$ aforementioned tax, 2.1k$ Internet+Cell+Netflix+VoIP Phone, 1k$ insurance, 5.4k$ maintenance)
-Eating & Health (22%): 24.7k$ (11k$ Groceries, 1.5k$ spirits, 4.2k$ restaurant, 3.6k$ pharmacy/doctor/dentist, 1.6k hair+beauty)
-Travel (6%): 6.6k$ (3k$ to Mexico resort, 2.4k$ trip to Florida at parent's house, 1.2k$ winter week, 0$ brother-in-law chalet) Yes we like vacation and beaches! - We don't know about travel hacking, our credit card is giving cash back on our grocery. At the time, we thought that it was the most useful since we always do groceries.
-Entertainment (1%): 1k$: 750$ romantic get aways with no kids, movie theater, museum... +250$ soccer league (earlier 3k-5% was a mistake)
-Shopping (10%): 11.6k$: 1.3k$ is gifts. 1k$ is misc shopping, 3.7k$ are clothes. As a computer consultant, I need to buy quite a few shirts and pants every year whic I buy on sale. my wife spends quite a bit on herself, 245$ on apps (120$ for Office 365 for my job, rest for tax report and phone apps), Shoes & boots: 1.3k$ (1k on my wife alone!), Coffee machine maintenance & supplies: 273$, Electronics (all bought on eBay, Amazon, Aliexpress, monoprice): 1400$ which includes a 400$ new cell phone, a 350$ used Surface Pro tablet for the job...
-Kids (daycare, courses…) (5%): 6k$
-Car maintenance, gas & parking (2.3%): 2.6k$
-Public transit (1.6%): 1.8k$
-Charity (1.8%): 1k$
-Misc (3%): 3.5k$ (mostly untraceable cash expenses)
TOTAL: 113k$ expenses. The 4k$ extra saving mentioned is not computed in the % and totals.

Assets:
House: 550k$ value - 138k$ mortgage = 410k$
Car: 3k$ - Kia Rondo 2008 bought in 2011 with 148,000 km for 7800$+tx =10k$. Needed the space for the two kids when going most week-ends to parents chalet. Is now at only 190,000 km!
RRSP: 181k$ + 37k$ = 218k$, in index ETF
Wife's Government Determined Benefit Pension Plan: unknown worth (need to ask HR). Supposed to be full benefit (65% of salary) by age 57, but of course we want to be FI well before that, don't we?
TFSA: 31k+31k$=62k$ in saving account, now transferring in index ETF
Other bank accounts: 50k$ (from which 16k$ destined for RRSP early 2017 and another part is to buy a new car in a couple of years. Some are provisions for upcoming city taxes and home maintenance, some for emergency fund, some is destined to TFSA)

Liabilities:
Mortgage: 138k$ remaining
1000$/month payment
3.64% interest rate for 10 years (6.5 remaining)
(possibility to increase payments that were never used: 39k$ per year in various formats)

Specific Question(s):
-Any general comments on what I could do to optimize my savings? What I see as the most promising cut would be on food: we are changing our usual grocery to a low-cost version and will go even more to Costco. We are already mainly vegetarian so save on meat.
-As parents of two young kids, we find ourselves running for our time all the time. Even though we plan a lot (weekly meal planning, bring lunch to work…), we still give 60$/2weeks for home cleaning. We find it hard to use strategies that save money but cost time. Any thought on that?
-What we like most so far is to go in “all-inclusive” resort in Mexico once a year with the kids. This cost us 3.5k$ last year which would mean that my share is 1.8k$ to keep things consistent. Of course, I can imagine almost free vacations (we also go to our brother-in-law country house for free), but I don’t think there is anything quite like the all-inclusive form: beach, drink & food, nothing to worry about (no grocery, dishes…) which is a relief for parents of 2 young kids. Any thoughts?
-My retirement savings have been in index ETF, but so far, I only made 4% average over 10 years. I would like to use the 7% hypothesis (4% spending+3%inflation) in MMM blogs, but it looks quite difficult to do even using a similar strategy. Being Canadian, we tend to invest a good chunk in Canadian stock, but I could try to increase a lot my US part. So far:
-Canadian stock (SP-TSX capped): 35%
-Canadian high dividend stock: 30%
-US Stock (SP500): 25%
-International: 10%
Would aim for:
-Canadian stock (SP-TSX capped): 25%
-Canadian high dividend stock: 20%
-US Stock (SP500): 35%
-US high dividend: 10%
-International: 10%
Any advice?

[Lews Therin]

Just FYI, at your current spending, your family will need 3.2 Million dollars to use the 4% rule... I'm going out on a limb here and going to guess that in the next ten years you will not be able to hit that number with savings of 40k per year (you and your spouse).

#1 priority has to be reducing expenses on every single line in your budget. You are in the generic 30% savings if you include mortgage repayment, which is around 25+ years to retirement (- your already started stash, so let's say 24 years)

So broadest strokes analysis means that you have to cut everything by half.

most people are used to monthly expenses, and it is pretty easy to see how much "fat" you have to cut out.

Let's start with food.
You are currently spending 800$ per month, (1600 for the family). That is an extremely high amount.
Let me say that again THAT IS A RIDICULOUSLY HIGH AMOUNT.
You can easily cut that number down by 50-100$ per month just by taking a detailed look at what you are buying. Start looking at different websites that give examples of excellent recipes that don't cost must (such as budget bites).

Current expenses:
-Savings (29%): 22k$  (12k$ in RRSP, 5.3k$ in TFSA, 1.2k$ in saving account for future car, 4k$ remaining after 2016) - This is good, but make sure to put all increased savings into TFSA and RRSP when you are able to cut in the expenses. Also, make sure to fill the previously unfilled TFSA room, you should be up in the 50k+ with investments (unless you have taken some losses).
-Home (22%) : 13.6k$  (6.8k$ mortgage, 2.5k$ aforementioned tax, 1k$ telecom, 0.5k$ insurance, 3k$ maintenance) - What is telecom?, and there are lower interest rates offered, it could gain you a lot if you can decrease this by 1, 1.5%
-Eating & Health (18%): 11k$ (7.8k$ Groceries, 1.7k$ restaurant, 1.2k$ pharmacy/doctor/dentist) - 650& monthly for groceries, 140 for restaurant, 100 for medical - Must cut down a huge amount. Groceries is the easiest if you S/O is not aware of the cost-savings measures... just start doing the groceries lists yourself and slowly she will realize you are eating just as well, but buying things on special, or targeting more core-effective meals.
-Travel (6%): 3.5k$ - This is where we need more details on how you are making these plans. Do you use Credit card churning / welcome bonuses to reduce your travel costs? There are many different credit cards and sites that explain how to "Travel Hack" and keep this number low.
-Entertainment (5%): 3k$ - Once again... 500$ a month? what does this entail?
-Shopping (7.5%): 4.6k$ - 400$ on shopping? are you not at the point where you have enough :D,
-Kids (daycare, courses…) (5%): 3.2k$
-Car maintenance, gas & parking (2.5%): 1.5k$
-Public transit (1.5%): 1k$
-Charity (1.8%): 1k$
-Misc (1.6%): 1k$
TOTAL: 61k$ expense. The 4k$ extra saving mentioned is not computed in the % and totals.

Assets:
House: 550k$ value - 138k$ mortgage * my two third share = 300k$
Car: 3k$ - What type / age / km?
RRSP: 181k$, in index ETF
TFSA: 31k$ in saving account, now transferring in index ETF
Other bank accounts: 20k$ (from which 12k$ destined for RRSP early 2017 and another part is to buy a new car in a couple of years)

It is very good that you want to make changes, however the effects you bring will not be in a vacuum, your S/O will be a major factor on your FIRE plans. Is she on-board, have you spoken to her about your plans?

I'm in Quebec city, so the cost of living isn't significantly different (apart from gas!)

[pzkfwg]

Thank you for the reply (and the wake-up call), Canadian Ben!
I modified my original post to give all the details required.

For the 4% rule, I would remove the saving and mortgage part for the calculation which brings me to 36,321 / 0.04 = 908k$ for me only (not sure I am doing it correctly; how about 3% inflation?). So I am not sure how you arrive to 3.2M$ and 24 years to retirement, if you may explain bit more for me.

I also find tricky to include my spouse in the calculation so far because she has a super generous retirement plan as she works for the government (full retirement by 57 y.o.), but I yet have no idea what it could mean to retire at 47 for her, so I try to focus on my own situation for now to see what it would mean to live frugaly. It might all end up being equivalent (she maxed her much lower RRSP and also have 30k$ in TFSA which will move to index ETF).

I am still at shock with the monthly grocery bill. We have to check this through. Again, we just switched our main grocery store which by itself should reduce by 11% (according to a study in a newspaper) and go more to Costco (35% economy according to same study).

I don't know yet about travel hacking, I must read about that. As explained in my edited post, we have a credit card that give cash back on groceries as we figured that it was really something that can be used without being forced to pay for something superflous. Here is the card:
https://www.pcfinancial.ca/m/english/credit-card/pc-mastercard-world/
Key points: 1% cash back on any expense + 2% cash back in the grocery store
But this makes me see that there is a new card (Elite plus) offered:
https://www.pcfinancial.ca/m/english/credit-card/pc-mastercard-world-elite/
Key points: 1% cash back on any expense + 3% cash back in the grocery store

I have been looking at Tangerine, though which give plain cash back:
https://www.tangerine.ca/en/spending/creditcard/index.html
Key points: 1% cash back on any expense + 2% cash back in two "categories" such as groceries and gas.

I am no canadian credit card ninja, though, so if there is a better option, I am all ears!

Thanks again for the advices!

[Lews Therin]

Your 4% rule is fine, especially if you are not calculating the pension of your wife in the arrangements, as that will become your "safety net".

Including your spouse will be necessary, as her spending is the same as your spending (I'm assuming you have merged finances/expenses) So cutting the family expenses by 20 is different from cutting your expenses by 10. To be most effective, you want to aim to reduce overall, not just on your side.
If you are brown bagging lunch, and your wife is going to restaurants, you can imagine it'll cause some friction after a few years.

I'm just confirming here, but you are aware that 30k is not the fully funded amount for TFSAs?

Also, what is telecom??

For credit card hacking, you are looking for different cards that have high welcome bonuses (usually for hitting an amount of money within the first 3 months) There are multiple Aeroplan and Air miles cards that will give you a free round trip in North America just for opening a card with them, and then hitting the minimum for the bonus. Other cards have travel refunds (use 200$ on anything related for travel, and they give you 200$ back with the receipt for example). Just make sure you aren't changing your habits, ignore cards that would need you to change your spending / or that have yearly fees that you don't want to deal with. There are usually quite a few First Year Free options.

A good explanation can be found here: www.travelmiles101.com
It will send you an email a day, allowing you to grasp the idea without being inundated by information.

Here in Canada, we have a few sites that will also allow you to get Gift Card bonuses by opening a card, GCR (Great Canadian Rebates), Lowest rate insurance, Red Flag deals.  They'll sometimes add another 100-150$ for opening the card you are looking at, since you can wait till a deal comes out.

If you haven't already, start tracking monthly exactly what you are spending, since you'll be able to get an idea of which services can be reduced, and get more information, especially if you want more detailed ways to reduce spending, as just saying 1k in public transit is not really enough for strangers to let you know if it can be reduced, same thing for car maintenance/gas/parking.

and now, to motivate you, Solid steps!

1- Start meal planning using the flyers for your local store, either Costco or others (usually there are quite a few REALLY good deals, and you want to maximize that in your meals. Think front page of the ad. You should be able to reduce the grocery bill every week, until you hit a number you are happier with.
2-Get new estimates / research prices for House & car insurances ; as well as cellphone plans (if you have one). I don't have your exact numbers, so if they are already optimized, great; if not, this is a very low hanging fruit to pick.
3-Start looking at your shopping habits - What are you buying that makes a 400$ dent every month?

All these points will allow you to A) Bring your expenses down, and B) Figure out exactly what you want to keep the same, and what would really not change much in your life if you cut down.

Looking forwards to more updates!

Public transit at 1k per year

[frugalwitch]

7.8k per year on groceries is way too much, especially if you eat little to no meat and with young kids that don't eat a lot? Where do you grocery shop?

I'm near Montreal and trying to eat more organics veggies, less meat, more nuts and my grocery bill is 425$ max per month for a 2 adults. Costco is okay but still pricy IMO; I usually go through the flyers and stock up on deals. I  subscribed to a winter fresh organic local basket and am very pleased with it; it's only 50$ a month and it covers my veggies needs for the month. I also stock up on dried goods with Nousrire : they offer organic produce at a very competitive price.

[pzkfwg]

Hi to you both,

Thanks again for the great feedback!

Canadian Ben

• Yes, I am working to get my spouse onboard with frugality. I need to come up with concrete actions for the buy-in. She is open minded so-far, we are already experimenting with other grocery stores since two weeks
• TFSA: yes, I now know that I could put another 28k$ in there. This is all the result of knowing nothing about early FI: I was doing right all the common financial advice in mainstream papers: stay away from debt, have a 3-6 months emergency fund... That's why I stopped at 30k$ in my TFSA: it was my emergency fund only. But over the years, with new raises, we ended up spending more naturally because there was no conventional plan in mainstream media as to what to do with additional savings. It never occured to me that I could retire much earlier than 65! Looks stupid now once we know of the inspiring early FI goals by MMM...
• Telecom: must have been a bad translation. It stands for: 1k$ Internet (42$/mo for cable high speed at eBox) +Cell (38$/mo FIDO unlimited+4GB, which is all refunded by the job) +Netflix (9$/mo)+VoIP Phone (35$/yr VOIP.MS). I hunt hard for the best deals. I never payed for cable tv and was early adopter of voip.
• Will look into credit card hacking. Isn't a bit of trouble for automated monthly payments to always change? I already see that there are significantly better cards than what I have now.
• I just registered the whole family on Mint, so I will have a better overview in the following months. I did crunch all my statements in Excel covering 2016 (including our common expenses, but not my spouse's personal expenses). This is what I presented here.
• I did split more several categories in my original post, if you wish to take a look back. Shopping has been split a lot. If there is other needed detail, please do not hesitate. Public transit: monthly pass is 78$/mo in Montreal which amounts to ~1k$ (2k$ for family). Car (my share): 700$ garage maintenance& Registrations, Gas: 736$ (of which 380$ refund by job), Parking 68$
• Meal planning with flyer: started yesterday!
• Insurrance: I used to go back&forth between two insurers to always get the welcome price, but after a couple of years, the car insurrance was always better with Desjardins: 35$/mo. As for home, we just got a big increase this year from 39 to 47$/mo but did not find a better deal elsewhere. Do you have any tip to find cheaper insurances (we do online quotations in the maintream companies TD, Belaire, Desjardins, SSQ...) but maybe there is unknown alternatives? We have high deductible of course.
• We will start questionning each shopping expense and favor Kijiji of new. I did a breakdown in my original post and none seem shocking to me (clothes, shoes...) but I am sure that we can cut more by being critical.

Frugalwitch

• Our main grocery store (70% of expenses) was Provigo which I just found to be the most expensive according to studies from Protégez-vous and Journal de Montréal. We are trying Maxi which happens to be the same company (so our PC credit card and points still work) and the cheapest after Costco and Walmart. A couple of products we usually buy are not found at Maxi, so this may prove a bit of a challenge. We are also subscribed to an organic coop that deliver weekly fresh and local vegetables and bread (<10%, or m75$/mo). The rest is on local commerce such as bread, fish and butcher (last of which we go no more!). (
• So what is your local organic basket name?
• Will look to Nousrire

I realize that being in a big city like Montreal incurs a lot of costs such as high city taxes. But the kids already have ties at school and our family is near, so it would be a big step to move to a smaller town!

[Lews Therin]

For insurance, I'll use Click Insurance / Click assurance (French). It's an insurance aggregator, so you'll get quite a few different companies calling you over, and then going over, and over, and over, and over the info you think they'd already have. (They are legally obligated to go through every point with you) After finding the best price, I'll have them send it to me by email, then try and call back the week after saying company X beat them by 20-40$ for the whole year and see if they could match as I'd prefer to go with them (usually works 2/3 of the time)

- Best part about maxi is the Price matching, you can simply bring a flyer if your store matches and they'll match the prices. There is also the PC Plus program, which will give you specific items rebates if you buy them (targeted towards what you spent in the past). It's quite helpful with produce and PC items. (Bonus if you match something that is also rebated since the match is applied first, and then the PC bonus)

We usually only go to Maxi when we can, just so we spend less time grocery shopping.

For the Credit cards, you keep your old cards (if they do not have annual fees) and yes you might have to switch the automatic payments if there is a better card, but if it's only the Welcome Bonus, then simply pre-pay the bills before the due date, and you should be able to avoid changing the automatic payments (internet/cable/cell/groceries)

The small effort required to change credit cards is worth it when you can get free 1200+ plane tickets

For the shopping, it all depends on your lifestyle, if you are already avoiding higher priced stores for "lesser" brands and keeping things until you/they grow out of it, then you'll slowly lower this as well, just by looking at each item and wondering if you need it.

-Very specific and likely will take some looking back, if your wife hasn't filled out her RRSP completely (leftover from previous years) It might be worth looking into Spousal RRSP as well, in order to max your pre-tax investments, and then use the returns to increase both TFSA. If both are already full / you plan on filling RRSP this year, feel free to ignore!

If you don't mind, what are you using for investments? Questrade, Banks? The 4% gain could either be high MER funds, you started investing at the worst time during the crash or opportunity cost (keeping % in safer, but lower return funds due to higher bonds and Money market

You're already in a pretty good position!

[GreenQueen]

Welcome! Also in Montreal with my partner and a baby. Just a few thoughts...

Groceries: We get a Lufa veggie box weekly. Incredible quality because it's mostly local organic/ hydroponic, decent prices if you pick and choose.

We only shop flyer sales at Provigo, IGA, Metro. Adonis or Akhavan (local) have far better prices. We do Costco every 6-8 weeks or so and shop from our list to avoid goodies.

Crockpot saves us for meals, especially since the baby arrived. I also buy huge bags of beans, cook lots and freeze them.

Travel: Friends get free flights with Airmiles. We have United Airlines reward cards (US-we are dual citizens) so we put most expenses on those cards and the free flights add up. I'm sure you can do something similar if you aren't already.

Montreal is amazing. You're smart for not moving to a small town just to avoid taxes.

[frugalwitch]

Choosing Maxi instead of provigo is a good choice indeed, prices at provigo are way too high.

I'm with the Bio Locaux for the winter basket and I like it very much. I won't subscribe for the summer one but I'll definitely go in farmers market to get deals on fresh produce. Here's an example of 2 baskets (value 50$). The fresh eggs aren't included, I bought them from a local ressource.

I'm in the south shore of Montreal and work on the isle.

[pzkfwg]

Just got back from Maxi this morning after planning with the flyer... and wow! It cost me easily 30% less, if not 50%! I'll wait to see the trend in the long run before getting too excited, but it's already the third time we go and the bill is significantly lower than expected. Today, I went to a bigger Maxi and at last found everything that was missing in the other two. This alone can be a game changer in our expenses!!! :-)

Good idea for price matching.

Both me and spouse have maxed our RRSP so we are aiming to catch up our TFSA with extra savings (both 30k$/58k$).

I use National Bank Direct Brokerage (NBDB) since 2005. Maybe I would have used Questrade if I had knew it at the time, but I only make around 5 transactions a year (50$max fee) to buy ETFs. I am all in iShares ETF so far with the repartitions explained in my original post. I will look into Vanguard and BMO competitors to see if I can lower even more the fee. I am now wondering if I should continue buying CAD-hedge ETF or let them fluctuate with the USD. It seems I loose in the long run with the CAD-hedging.

So the 4% refers to my RRSP only, where I always maintained a high-stock proportion (85%+). I started in 2005 and until only a couple of years ago I was under 0% (2008 must have hit hard)! I tended to hold a ~70% canadian portfolio (15% US, 15% International, 10% can. bonds, 60% can. stock), but I now aim more and more US (it outperformed everything over 10 years and is very diverse by itself!). So the 4% is computed by NBDB "since the opening". Recent years have been good except for 2015 (-2%): between +9 and +14%. 5-years return is +8.2%. I am in the process of merging my TFSA in that strategy (it was sleeping in ING/Tangerine saving account).

GreenQueen: we also use Lufa! :-)
We don't have near Adonis or Akhavan, but we have a "P.A. Market" which is walkable and also less expensive. We could use that in our strategy.
Crockpot is awesome to save time on recipe. We also switched to a lot of beans since we are mostly vegetarian.

Frugalwitch: just curious: how is the transit between south shore and the isle? Must be awful! :-S

Thanks again to all! :-)

[frugalwitch]

Transit is awful but I usually avoid rush hours by going to work when I want and choosing evening shifts. If there's no traffic I only have to drive 25 minutes. SO and I wanted a house under 300k with a average courtyard (for our dog and my garden) and price on the isle are high :\ .

[GrandioseMustachio]

"I would remove the saving and mortgage part for the calculation which brings me to 36,321 / 0.04 = 908k$"

Yes, that's right (unless you get that spending down). On top of owning your house mortage-free.

Most of the other comments are spot-on (groceries, other spending, etc.)

An issue is that you'll have over 350k$ tied up in a house that will actually cost you 500$/month to live in (taxes, insurance, maintenance). In other words, at an 4% annual withdrawal rate (1166$/month), you could actually afford a 1666$/month home (instead of 2/3 of your house). You don't need nearly that much to live well in Montréal. You should likely take a hard look at your housing needs.

Also, you live in one of the most bikeable cities in North America. Bike more and save on car and transit costs. Bixi is great.

Finally, you will have some RRQ+PSV as a safety net (near age 65). Which is nice.

[pzkfwg]

Yes, the condo is getting a bit expensive as I live on the Plateau on an amazing spot and the condo's worth went from 330k to 550k in 8 years or so while maintenance went up as it hit 15 years old. We have remote plans to retire away from the big city, that would need to wait ~15 years for the kids to grow up first. We could easily find a good housing at half the cost and cash in the difference.

I decided to try biking next summer with Bixi. With the narrow streets, I always thought too dangerous to bike, but MMM's blog is motivating me. I am currently using exclusively public transit+walk to go to work.

I did not get that sentence: "In other words, at an 4% annual withdrawal rate (1166$/month), you could actually afford a 1666$/month home (instead of 2/3 of your house)." What do you mean by that and how do you get these numbers?


On my side, I did some scenarios about getting to 908k$, assuming a yearly 3% pay increase:

• If I don't change anything to my spending, I could get to 908k$ in 15 years with a conservative 4%appreciation (what I made so far with my RRSP)
• It would take 12 years with a 7% appreciation
• With 7% again, if I cut 4k$ of spending, it would take 10 years

I don't know if I compute it right, but it seems to be a lot of trouble to cut 4k$ of yearly expense just to cut 2 years out of 12!

This week, I also significantly rebalanced my RRSP investments: going 58% US, 14% international and 28% Canadian (had 33%-15%-52%).

[Lews Therin]

For most people, when they start actually looking at a budget in detail, and removing the low hanging fruit (things that can be reduced with very little effort and no change to the lifestyle) they will be extremely surprised by how much they reduce their yearly spending.

Sure 100k might only be two years more of work (However, think about it daily, that's still a long time of extra work, for something that you might easily be able to do without).

The other point, is every $ in reduced spending is both increased savings, and if you add in reductions to your wife's half, 4 years is a significant amount of time.

The other way to see it is in percentages. Is 2 years extra (2/12) 16% of your work life worth the amount of happiness that 4k will bring you?

In the end, you are the one who knows what your level of expenses are, but right now the goal is to see exactly what is fluff that you simply increased without realizing, and what is something you love, and are willing to add work days/months/years in order to continue forever.

GrandioseMustachio is using the down payment/principal in your house, and explaining the opportunity costs of not having that money invested. 350k X .04 = 14,000 (Yearly) or 1166 monthly.
You could either leave the money in a house making nothing, or rent (with a safe WR of 4%) and bank the extra.

[PJ]

Just got back from Maxi this morning after planning with the flyer... and wow! It cost me easily 30% less, if not 50%! I'll wait to see the trend in the long run before getting too excited, but it's already the third time we go and the bill is significantly lower than expected. Today, I went to a bigger Maxi and at last found everything that was missing in the other two. This alone can be a game changer in our expenses!!! :-)

Good idea for price matching.

+1 on price matching

I've only been doing it for the last couple of years, but I know it saves me a lot of money, because even the cashiers sometimes express surprise at the final price on the register!  I shop at Walmart because it's on my way home, and open late, and also, because they price match.  Other stores do too, but they are slightly less convenient for me. 

I am amazed, sometimes, at the percentage of my grocery shop I can get at a lower price.  And by the cyclical nature of the sales.  For example, I like a pretty hearty whole wheat bread.  Country Harvest and Dempsters both make ones that I like.  With the regular flyers that I get (Walmart, Metro, FreshCo, No Frills, Food Basics) it is rare to find a week that one of them doesn't have one of those brands on sale.  So I basically never pay full price for bread.  Canned goods, yoghurt, cheese, frozen foods - all of them also regularly go on sale on rotation, so if you're not "brand particular" about too many things, then you can usually find good prices.

In terms of fresh food, you may not always want the veggies that are on sale at your usual store, but when you open up the possibilities to include all the veggies that are on sale somewhere, it's a lot easier to say "We'll only have what's on sale this week."  I'm vegetarian, but I assume that the same is true for meat, i.e. "I don't really want ground beef, which is the only really cheap meat here this week, but look - another store has chicken breasts on a good sale - I'll just price match those!"

[pzkfwg]

About price matching, how do you actually:

• Check all the flyers without taking to much time? Any tricks? I was thinking to open RedFlagDeals.com to have all the flyers front pages in front of me to plan my weekly meals and price matches. I don't receive the paper-based flyers in my condo.
• Show all the flyers to the cashier without taking a lot of time and exasperate the other customers in line? I was thinking maybe to take a bunch of screenshots on my cell phone...

Thanks!

[Lews Therin]

I receive the paper version, but there are apps that can be used to "Clip" specials if you want to google it.

For the time spent on looking at them (Paper or electronic) after a while it becomes almost second nature when you get used to the prices. You know when something is a good deal, and you know what your family likes to eat, so you rapidly scan the flyers and only pick out what you want.

Showing the price matches might become an issue if you don't already have it open on your phone and have to wait for each page to load, but if you have it ready to go, it shouldn't take much time to show the clerks.

For those in line behind you... reducing my groceries by 10-20$ per time in a store is worth not caring about what they think about me... but that's a personal feeling. You might decide to skip a few things if the match is not high enough, but personally I'll just put the things that aren't being matched first, and show each item that will be matched as the clerk goes through the rest of the groceries (in order to make it go faster)

[pzkfwg]

Thanks for the advice, I just found Flipp for Android and I am just astonished of all that power at my fingertips! All the flyers there, clipping for price matching, search engine through all flyers... OMG, when is my next grocery? :-)

[GrandioseMustachio]

Yes, the condo is getting a bit expensive as I live on the Plateau on an amazing spot and the condo's worth went from 330k to 550k in 8 years or so while maintenance went up as it hit 15 years old. We have remote plans to retire away from the big city, that would need to wait ~15 years for the kids to grow up first. We could easily find a good housing at half the cost and cash in the difference.

Good to be thinking about that. Although you might miss being able to walk to the fruit store.

I decided to try biking next summer with Bixi. With the narrow streets, I always thought too dangerous to bike, but MMM's blog is motivating me. I am currently using exclusively public transit+walk to go to work.

Yes! That's the right way to go.

I did not get that sentence: "In other words, at an 4% annual withdrawal rate (1166$/month), you could actually afford a 1666$/month home (instead of 2/3 of your house)." What do you mean by that and how do you get these numbers?

As Canadian Ben mentioned, I took the value of your part of the condo, and looked at how much income you can safely generate after selling the place. And I add 500$/month, which correspond to your part of the non-mortgage expenses associated to the condo. Actually, if you add your DW's part, you could basically rent a 3000$/month apartment. You could most definitively do better and pocket the difference.

On my side, I did some scenarios about getting to 908k$, assuming a yearly 3% pay increase:

• If I don't change anything to my spending, I could get to 908k$ in 15 years with a conservative 4%appreciation (what I made so far with my RRSP)
• It would take 12 years with a 7% appreciation
• With 7% again, if I cut 4k$ of spending, it would take 10 years

I don't know if I compute it right, but it seems to be a lot of trouble to cut 4k$ of yearly expense just to cut 2 years out of 12!

If you cut expenses by 4k$, you no longer need 908k$, but rather 808k$.

That said, consider this scenario:
1- You sell the house and get a 1800$/month apartment (i.e. your part is 900$/month).
2- Thus, with no cuts to your current budget, you need 1.04M$.
3- You would have 532k$ in investments. Basically, by saving 22k$ as you are doing now, you could retire in about 8 years (with a 5% real return).
4- If you cut 4k$ annually in spending (i.e 26k savings), you can retire in 6 years, with about 900k$ in assets! Imagine that!
PS: I didn't take taxes into account. You might need an extra year or two to accumulate enough capital to pay the taxes on the capital gains and rrsp withdrawals.


This week, I also significantly rebalanced my RRSP investments: going 58% US, 14% international and 28% Canadian (had 33%-15%-52%).

[pzkfwg]

Hi! I need help to figure out how the credit card hacking works. I found via this site the best possible rewards based on our current spending:
http://www.greedyrates.ca/cards/Rewards-Credit-Cards?kind=1&plan=1&interested=1&gas_spend=56&grocery=825&dining_spend=257&drug=84&airface=172&hotel=0&other=1000&years=1&order=desc&

The Amex Gold Rewards catches the attention with 943$ reward and what appears to be more flexibility than the top Starwood one, but I know next to nothing on how points work. We now simply have PC financial points that easily translate in free grocery. But when I look at the AMEX Reward points (convertible in Aeroplan points 1:1), I really have a hard time understanding the real worth of all that (25k points bonus...2pt/$). There is no simple table of the ratio to exchange points. I want to make sure that it is flexible enough. For example, I plan to use my existing card to pay trips because it comes with cancellation insurance contrary to the AMEX one. Will I be loosing the best exchange rate option for my AMEX points by doing that? This is all so confusing! :-) Any article that explains in plain English/French the value of all those reward program points for Canada?

Thanks for the help!

[PJ]

Thanks for the advice, I just found Flipp for Android and I am just astonished of all that power at my fingertips! All the flyers there, clipping for price matching, search engine through all flyers... OMG, when is my next grocery? :-)

Sounds like you found the solution for you! 

Personally, I don't like looking at things on my phone that much, and prefer to use the paper flyers, which come to the door every Thursday in the free local newspaper.  In case others are reading along and curious to know how to make this work efficiently, I'll share my process.

At home, I go through the flyers with a big black marker, and circle anything that I think might be a good enough deal.  The big black marker helps find me find the right page more easily once I'm in the store, compared to just a pen or pencil.  Be careful not to circle on top of the price or description of the product (brand, size, flavour, etc)!  If I notice a better deal in flyer #3 than in flyer #1, I go back and X out the item in flyer 1.  I am just one person to shop for, and buy enough of the same things from week to week that I can usually hold the information in my head well enough :-)  If I couldn't, or on occasion when I've done a really big shop, I make a list, divided by type of food (produce, dairy, canned goods, household items, etc.) with a short note about which flyer the best price was in (initials mostly - FB for Food Basics, NF for No Frills, etc).  Dividing it by type of product means I can just move around the grocery store normally, rather than running all over to find the FB stuff, then retracing my steps to find the NF sale stuff.

Next important point is that I put the stuff in my cart arranged by flyer.  All the FB stuff goes, for example, in the front right corner, while all the NF stuff goes on the back right side, and so on, and the flyer gets tucked in there with them.  I try to remember to turn down the corners of the pages of items I'm purchasing too.  This is also the point when you double check the sizes or any other restrictions, such as a flavours, or limited quantities, etc.

When I get to the cashier, I lay everything out on the conveyer belt by flyer too, and where applicable, place my coupons right on top or tucked under the item.  Like someone else said, I find it helpful to load the non-price matched stuff onto the conveyer belt first (in my case, all the Walmart stuff, since that's where I shop).  That gives me a bit more time to load up the belt and organize everything else.

Then, as the cashier scans, I take charge of the flyers, turning to the correct page to show them the item, and usually trying to hand the coupons to him/her as that item is rung in.  Unless it's a very small shop, I tell them to just put everything off to the side and I bag it myself, because things are not necessarily organized as they should be to protect the fragile stuff! 

I know it slows things down a little bit to price match, but once you get yourself organized, it shouldn't slow things down too much.  Honestly, I'm often faster than the cashiers!  But if I see someone getting in line behind me with just one or two items, I do make a point of either letting them go first (unless my has already been started) or saying something like, "Just a warning that I am doing a lot of price matching/using a lot of coupons.  Might be a little bit slower than normal."  Sometimes they look elsewhere for a faster line, and sometimes they're ok waiting until I'm done.

Hope that's helpful, and good luck in the grocery wars!

[pzkfwg]

Thanks for the good tips! I'll try the Flipp route and optimize the conveyor belt and see how it goes.

[Lews Therin]

For credit card hacking, since you're starting from 0, you can easily go through a couple of cards (both you and your wife can do it) aiming for the Welcome bonus only. There are multiple 15,000+ cards, so you should target the highest ones first that have first year free. As you get more comfortable with the system, you'll be able to decide if you want to get cards like the Scotia infinite (4% gas and groceries) or if you're happy with the one you have.

Even just going for an American express gold each is enough to pay for 2 Round trips to Europe, and if you search for the right flights, less than 300$ (due to fees). Add in a few other cards, and you start to amass quite a large amount of points.

Personnally: aeroplan > air miles as  it's much easier to avoid fees on aeroplan.

But there are many "credit card hacking" topics, and it would be worth searching google (just google credit card hacking, or if you prefer mmm forum Canada credit card hacking) and you'll start finding info.

[pzkfwg]

I will search more on MMM forum, but spent the afternoon Sunday googling on the subject, but did not find a specific answer on: will it allow me to travel efficiently to Mexican/Cuban resorts with all-inclusive packages? Also, my current card has cancellation insurance (useful with young kids that can get sick) so putting a trip on another card to redeem points can put me at risk. So, I don't see clear details on my situation other than: get this and this and this card for huge points bonus... OK but what is the value of those points in my situation? Thanks again! :-)

[Lews Therin]

Option A: Card with travel vouchers (repays you the amount you spent on "Travel" I.E. lodging, flights)

Option B: You can book all-inclusives with air miles, but usually the best redemption is flights.

But once again, you aren't trying to reduce your vacation to 0$, you're just making the price go down. If you can reduce your travel by removing all flights (by paying with points) all you have left is lodging, meals and activities. That's a significant reduction in costs.

http://www.travelmiles101.com/

It has a free class (just need to put in email) that'll go through the largest programs (mostly American, but reasonably close for Canadians)

This Topic just appeared, I skimmed rapidly, and it has a LOT of info, should keep you busy on the subject.

http://forum.mrmoneymustache.com/welcome-to-the-forum/how-to-learn-'travel-hacking'/?topicseen

[pzkfwg]

Thanks a lot for the two links! Good info. I subscribed to the course and read the whole thread. Hopefully, I will understand better with the course :-)

[Chaplin]

Hello @pzkfwg. You are in a very good position to meet your goal, but not without some changes, so it will depend on how much you really want to meet that goal and what you're prepared to change. From my own experience, and what I've read of other people, that "change" initially sounds like "giving something up." So, initially, planning to meet a FIRE goal feels like deciding on trade-offs. It turns out that the changes only seem like negatives that are the price to pay, but are actually also positives.

It can take months or years to start to feel that way, so stick with it. People further down the road to FIRE than you are offering good advice, but some of it might be too much too soon. It also seems to me that you need to get more clarity on your current situation.

My suggestions:

1. Re-state the initial information in your first post with more clarity. Trying to separate your finances from your wife's for your case study makes it harder to get a full picture, not easier. Even if her situation is more complex, you have to get a handle on it since you share a house and kids, and presumably will meet your expenses in retirement with combined income.

2. Travel hacking is great, but don't let it distract you from the real question of how to achieve your goal.

3. Some of the advice you're getting seems too much too soon. Advice to move to a smaller town, or sell and rent, is worth considering, but they're huge lifestyle decisions. I assume you consciously or unconsciously asked your question about retiring in 10 years with a baseline assumptions about not moving. See what you can do with your other expenses and sources of income to see if your goal can be met without moving. If you can't meet it that way, then you have to consider alternatives. Even if you can meet your goal without moving, you could choose to speed up the process with a move.

4. The 4% rule is a great rule of thumb. In your case, though, it sounds like you’ll have very distinct phases to your retirement:
Age 37-43: still paying for house
Age 43-47: extra savings since mortgage paid off
Age 47-57: you retired, wife working – live on wife’s income, or both retired living from savings only (plus child tax benefit)
Age 57-60: wife’s pension starts, help kids with university
Age 60: CPP/QPP kicks in, move to smaller town and invest the difference
Age 65: OAS kicks in
If you map this out, you might find that you need to draw from RRSPs and TFSAs at a higher rate (7+%) initially until each of these expense reductions or income sources kicks in. This should give you a lot more confidence than just aiming for a single number based on the 4% rule.

[pzkfwg]

Thanks for that perspective, Chaplin!

The reason I separated my finance from my wife's was because I did not have all her statements and her job's pension plan is more complicated than my RRSP to follow up. We otherwise live very similarly, so to begin, I thought to use my situation and extrapolate. Moreover, I wanted to set an example as a Mustachian to bring her onboard. For more than a month now, I take charge of the groceries, which never happen before and we save consistently at least 25-30%! I will need at some point to compute her status considering her pension plan, though. Also, everything is now linked to Mint so it will presumably be easier to analyze our expenses than manually categorizing a year's worth of statements.

So back to your suggestions:
1- Any idea how to compute the worth of a "defined benefit" pension plan? I know she would have full access at 57, but if we want to retire much earlier, there must be a way to compute its worth in some way. This could motivate me to make all the computation for the whole family.
2-Agreed. So far, my research tend to tell me that the value from sites that I mentioned earlier is if I optimize the miles with a maximum of flexibility which may not be the best for my family so I will probably just try the highest cash-back reward possible (AMEX Simplycash with 5% return for 6 months comes to mind).
3-Agreed that I assume to stay here for the sake of our kids stability. To really worth a move, I would need to change town, and I am not prepared to do that until ours kids grow autonomous. I would then cash in the difference, but it is true that I would not benefit from compounded yield compared to if I cashed it today.
4-Essentially correct, except that the mortgage is still 13 years left (the contract ends in 6). I am vaguely wondering if I should shoot for accelerated payments or focus on maximizing my TFSA. Probably a mix of both: I am in the process to increase my payments by 15% for 1900$ extra payement/year. Also, I don't plan for my wife to continue working until 57, that age is the official retirement plan to have full benefit from her pension plan.
But I understand your bigger points that there are a lot of temporal variables to take into account for a complete computation as opposed to the 4% rule of thumb. I honestly don't know how to make all those calculations though. Is there a Canadian spreadsheet somewhere that can be used for that?

Thanks again for that perspective!

As a side note, yesterday, I went to the grocery armed with Flipper for price matching. It turns out that Maxi is quite rock bottom and I could only price match 1$ worth (I did not bother for less than 25¢ differences!). I'll try next weeks to see if I get better luck.

Thanks again to all!

[Lews Therin]

Glad you're continuing to post updates! It makes it more interesting for us to keep up and give more info when we see that you are using all the tricks / information we are giving you.

For the Mortgage VS investment decision; It's proven that the TFSA (as long as you are investing) is a better long term solution. You will be making the difference between your mortgage interest (3.54) and ATLEAST 4% (which is the basis of the 4% SWR that you have agreed to (or else you would not trust that 25x expenses is enough to survive).

For the Mortgage vs taxable investments, it's also been proven that the investments will win long term (thus reducing the amount of time before FIRE) ; but quite a few people will prefer the emotional choice of paying down the mortgage, as they feel safer to own the home, and do not have to deal with the risks of investments. Most people will say both are fine, but since you are trying to optimize your spending/investments and expenses to reduce your time to FIRE, 100% go for TFSA, RRSP, RESP, taxable accounts before increasing mortgage payments.

However** and this will be another fun step to reduce expenses & increase savings, 3.54% is on the high side for mortgages, and it would be very useful to check sites like ratehub or talk with a mortgage broker (or even look at the newer offers for your bank) as you can easily lower your payment by 1% fixed, or even lower if you are comfortable with variable. Just ask your bank what the penalty would be to refinance (renew the mortgage with a lower rate), and then have them fill out the mortgage summary details to see when you break even. if you go down by 1%, you should be breaking even within 6 months, and the rest is all BONUS MONEY!!

[pzkfwg]

I don't think that I can change my mortgage. 4 years ago, the interest rates were at an all-time low so I figured that they could only go up, so I closed the mortgage for 10 years at a fixed 3.64%. It still puzzles me how the interest rate stayed low for that long since then... Before that, I had a variable rate, prime-0.85% which was amazing and I paid quite a bit of capital then. At renewal time, the offers were prime+something which was not as inspiring. I actually found my rate through Ratehub and TNM was best at the time.
So, I will at least maximize TFSA (should take me years to cover the 28k$ available anyway)!

[Chaplin]

The reason I separated my finance from my wife's was because I did not have all her statements and her job's pension plan is more complicated than my RRSP to follow up. We otherwise live very similarly, so to begin, I thought to use my situation and extrapolate.

That makes a lot of sense and I shouldn't have been critical of it. You make a model, learn from it, then keep refining it. It's iterative.

For more than a month now, I take charge of the groceries, which never happen before and we save consistently at least 25-30%!

I did exactly the same thing.

1- Any idea how to compute the worth of a "defined benefit" pension plan? I know she would have full access at 57, but if we want to retire much earlier, there must be a way to compute its worth in some way. This could motivate me to make all the computation for the whole family.

I suggest posting a question in the Ask a Mustachian section.

4-Essentially correct, except that the mortgage is still 13 years left (the contract ends in 6). I am vaguely wondering if I should shoot for accelerated payments or focus on maximizing my TFSA. Probably a mix of both: I am in the process to increase my payments by 15% for 1900$ extra payement/year.

Even at 3.5%, I would pay the minimum on the mortgage and invest as much as possible. As you get closer to the end of the contract the penalty for renewing early goes down. At some point it will be worth it if rates are still low.

But I understand your bigger points that there are a lot of temporal variables to take into account for a complete computation as opposed to the 4% rule of thumb. I honestly don't know how to make all those calculations though. Is there a Canadian spreadsheet somewhere that can be used for that?

I gradually built my own by starting with something like this (this shows a hypothetical retirement in 2019 with various income streams coming on line):

	2017	2018	2019	2020	2021
RRSP deposit/wd	20,000	20,000	-20,000	-15,000	-2,000
RRSP balance	300,000	325,000	350,000	336,000	337,000
TFSA deposit/wd	20,000	0	0	0	0
TFSA balance	20,000	21,000	22,000	23,000	24,000
Pension	0	0	0	-5,000	-5,000
CPP/QPP	0	0	0	0	-8,000
OAS	0	0	0	0	-5,000
Contributions/Withdrawals	40,000	20,000	-20,000	-20,000	-20,000
Expected Expenses
Home Equity

You can add as much detail as you like. I have separate sections for my wife and my RRSPs, TFSAs, non-registered accounts, RESP, cash, mortgage, income from part-time work or side-hustles, etc. You have to get the signs right (I've used positive for deposits and negative for withdrawal, so the total income line is a negative when everything is summed up). I've also included lines for minimum RRSP withdrawals so I can plan to get my balances below a level where where those have an effect.

[Lews Therin]

I don't think that I can change my mortgage. 4 years ago, the interest rates were at an all-time low so I figured that they could only go up, so I closed the mortgage for 10 years at a fixed 3.64%. It still puzzles me how the interest rate stayed low for that long since then... Before that, I had a variable rate, prime-0.85% which was amazing and I paid quite a bit of capital then. At renewal time, the offers were prime+something which was not as inspiring. I actually found my rate through Ratehub and TNM was best at the time.
So, I will at least maximize TFSA (should take me years to cover the 28k$ available anyway)!

Lowest I  can find is 1.90 (5 year variable).
https://www.ratehub.ca/current-mortgage-rates-quebec

For the defined pension, HR for her company will be able to answer questions!

You'll fill up that TFSA much quicker than you think.

That's a huge difference. Who are you with?

[pzkfwg]

For the mortgage? First National. Through TNM broker.

[Lews Therin]

https://www.firstnational.ca/mortgage-brokers/mortgage-rates

This is what I get when I check their current rates:
You should be able to lower it from 3.54!

[pzkfwg]

BIG UPDATE!
I updated all my first post to include my spouse to have a full family view. She is slowly getting onboard with FI and I categorized every of her 2016 expenses. We need to analyze a bit more what that means. There are categories that skyrocketed with her additions: clothes, shoes, "beauty", restaurants with colleague, cash expenses.
Please keep in mind that her apparently lower saving rate is because she has big deduction from her pay due to the generally very well regarded government determined benefit pension plan (which we still need to understand its current worth).

Finally, I am very excited to report my grocery expense for today: 100$, including 8.50$ price match rebate and 2.5$ points. I am thrilled! :-) We were in the 150-200$ range in 2016! :-)

[Lews Therin]

I think a lot of the points are pretty standard, now that you are aware of your spending, you realize where you have been spending too much; just tracking will allow you to reduce them.

For TFSA, you have a maximum allowed amount of 46,500 (unless you have capital losses that were removed from the TFSA). You should be filling this up to the brim right away, after your RRSPs since it'll be forever safe from taxes. (Hopefully)

For your mortgage, this is just a detail, but can be quite significant in your expenses calculations: You can remove the portion of the payment that goes to principal (or put it in a separate category) as that is also forced savings, and when the house is fully paid off the whole line will disappear.

[SweetLife]

About price matching, how do you actually:

• Check all the flyers without taking to much time? Any tricks? I was thinking to open RedFlagDeals.com to have all the flyers front pages in front of me to plan my weekly meals and price matches. I don't receive the paper-based flyers in my condo.
• Show all the flyers to the cashier without taking a lot of time and exasperate the other customers in line? I was thinking maybe to take a bunch of screenshots on my cell phone...

Thanks!

I use FLIPP ... but I don't use any data so its a pain sometimes and I end up having to carry the flyers with me anyways ... but I do like it for planning purposes!

Good luck! and nice to see another Canadian!! :)